Archive for October 28, 2011

My Beef With Tankless Water Heaters.

Tankless water heaters are sexy.  They take up less floor space, they provide an endless flow of hot water, they’re environmentally conscious… and they’re really expensive.   If you enjoy showing off your home’s mechanical equipment to your friends or you’re in to being green at any cost, get a tankless water heater. On the other hand, if you’re in to saving dough, doughn’t buy a tankless water heater.

A tankless water heater will not save you money.

I stopped by my local big orange box the other day to check up on the latest sales pitch for tankless water heaters.  The brochure for tankless water heaters said they can save up to 25% in fuel costs.  That sounds great, but lets examine what that means. I spend about $12 per month for natural gas during the non-heating season, if I don’t include my fixed fuel costs, such as the ‘fuel delivery charge.’  This figure includes the gas for my water heater, clothes dryer, and oven.  Just for the sake of argument, lets also pretend that I don’t have a family of four who uses the clothes dryer all the time, and I don’t use the oven all the time.  We’ll pretend that I spend the full $12 / month just  to keep a 50 gallon tank of water hot all the time.

Fuel savings

If I save 25%, I’ll save $3/month, or $36/year, or $720 over a period of 20 years.  My standard 50 gallon water heater has a 12 year warranty, and so does the tankless water heater I looked at… but the life expectancy for a tankless water heater is apparently 20 years, so I’ll give it the benefit of the doubt and assume it will last that long.

Sizing a tankless water heater

The brochure on tankless water heaters said I should buy the largest tankless water heater they make, based on the number of bathrooms I have in my house – three.   The particular model is the ECOH200DVN.  This unit boasts a 9.5 gallon per minute flow rate at a 35 degree rise in temperature.  With an average ground water temperature of 45 degrees here in Minnesota, that would give me… 80 degree water.  Ha!  That’s useless.  To get 120 degree water, my flow rate would be reduced to 5.1 gallons per minute.  Maybe I’ll need two water heaters. For the sake of argument, lets just say I only need one.  This unit retails at my local Home Depot for $1,427.00.

Installation costs

Plumbers charge a lot more money to install tankless water heaters, because they’re a lot more work compared to traditional storage tank water heaters.  The water supply pipes will need to be re-routed, the venting will need to be completely redone, the unit will need to be mounted on a wall, an electrical outlet may need to be added, and the gas pipe may need to be re-done.  Just for fun, let’s say you were able to find a plumber to do all of this for $1,000.   A traditional water heater might cost up to $500 in labor for replacement, so we’ll assume you’re only spending an extra $500 in labor for a tankless water heater.

The bottom line

A traditional 50 gallon water heater with a 12 year warranty retails for $559 at my local Home Depot.   I would spend an extra $868 to buy a tankless water heater, and at least an extra $500 in installation costs, making this unit cost at least $1,368 more than a traditional water heater.  I would spend at least $1,368 for the potential of saving $720 over a period of 20 years.  If I ever buy a tankless water heater, I won’t be doing it because I’m hoping to save money.


This post was reblogged with the authorization of it’s author Reuben Saltzman, with Structure Tech Home Inspections.


FHA vs. Conventional Financing

Whether you are a First Time Homebuyer or have previously owned a home, an FHA loan may be the right choice to buy your single family residence, condominium or townhouse. FHA is a government backed program and stands for Federal Housing Administration. FHA offers great interest rates on 30 year fixed rate loans and Adjustable Rate Mortgages making owning a home much more affordable than many people might think. FHA allows buyers to secure great financing by charging borrowers an Up Front Mortgage Insurance Premium of 1% of the loan amount (which is tacked onto your loan balance and paid off over 30 years). There is also an annual Mortgage Insurance Premium which is broken down and paid on a monthly basis. That premium starts at 1.15% of the loan amount annually (and decreases as the down-payment increases). The minimum down-payment is 3.5% of the purchase price for the home.

Now for how a conventional loan works… Conventional loans are not backed by the government. They are also a great fit for many buyers whether first time homebuyer or not, buying a single family residence, condominium or townhouse. Conventional lending offers great fixed and ARM programs just as FHA financing does. Conventional lending does not have the backing/insurance of the government against a potential default of the loan. Therefore if a person is putting a down-payment of less than 20%(no mortgage insurance necessary over 20% down with conventional), there will be a different type of Mortgage Insurance secured. These mortgage Insurance programs come with a much wider array of structures. With Conventional, there is no mandatory up-front Mortgage Insurance Premium. There is an annual Mortgage Insurance Premium broken down and paid monthly. There are also programs available where the lender will pay these premiums for you in exchange for a higher interest rate on the loan, or even programs where the buyer can pay the premiums up front in full or partially. The minimum down-payment for conventional lending is 3%. However at a 3% down-payment, securing mortgage insurance can prove to be difficult and expensive. A popular down-payment amount for conventional lending begins at 5% where the mortgage insurance is more easily attainable and less expensive.

Here are a few key points in determining whether FHA or Conventional is best for you… FHA financing is generally more lenient on credit ratings, income history and debt to income ratios. It is generally easier to navigate through the FHA underwriting process. If a borrower has a marginal credit rating, a relatively high debt to income ratio or an unstable work history an FHA loan will most likely be the best option for them over a conventional loan. On the positive side for conventional lending, if a borrower has a good credit rating, a stable employment history and a relatively low debt to income ratio there will often be some Mortgage Insurances choices for them that will be beneficial over the FHA’s Mortgage Insurance program.

While the above information gives you some idea of the differences, comparing FHA financing against Conventional financing is something that should be seriously considered on a case by case basis. There are many factors that need to be taken into consideration in determining which type of financing will best suit your needs/goals as a homebuyer. If you would like to learn more about financing options, please go to our Calendar page and reserve a spot in one of our FREE First Time Home Buyer seminars.


What is a Sewer Scope, Anyways?

A sewer scope is potentially dollar-for-dollar one of the best insurance policies you can buy, when purchasing a home.  By “insurance policy”, I don’t mean that it actually reimburses you in the case of necessary repairs, but I do mean that it may help you save tens of thousands of dollars in the long run.  During a sewer scope, a specialist runs a camera through the sewer line from the house hook up, to the city hook up.  The specialist is basically looking for plant or tree roots that have grown into the sewer line; or cracks, breaks, or detoriation to the pipe itself.  Some minor roots can often be remedied by a roto-rooter company, snaking a cutting blade down the pipe to cut away any existing roots.  However, if the line is completely broken or cracked; depending on where the break is, it could cost upwards of $10,000-12,000 to repair.  This stems from how far underneath the ground the pipe is burried, as well as if it is burried underneath a driveway, sidewalk or city street.  Cutting through concrete can become pretty costly.   The specialist only goes as far as the city hook up, because anything after that point is the city’s responsibility to repair.  However, any issues with the sewer pipe between your house and the city hook up is your responsibility to repair.  Hence, the importance of doing a sewer scope BEFORE you purchase a house.

If you do a sewer scope before buying a house and something major does come up, you may either ask the seller to repair the issue, or simply choose to not buy the house at all.  But if you for go conducting a sewer scope upfront and buy the house anyways, any problems you find with the sewer line after the fact, are your sole responsibility.  That being said, many buyers don’t want to spend the money to conduct a sewer scope before the seller actually agrees to sell them the house.  Because of this it is generally recommended to conduct a sewer scope during the inspection period alloted by the inspection contingency usually included with the purchase and sale real estate contract.  The inspection contingency allows you a certain amount of time to conduct inspections, and exit the contract if the buyer deems the condition of the property insufficient.  However, it is not required by Washington State law to include this clause in a real estate contract.  So if you want this protection, you have to confirm that it is part of your contract.  If you would like to learn more about the inspection contingency, real estaste contracts, or buying your first home in general, go to our Calendar page and register for one of our First Time Home Buyer seminars.